Do an Accurate Closing Statement

It is all about money. The bank is trying to minimize its loss by taking a short payment as a better choice than any alternative. So, how much will they get? The contract will not reveal the net proceeds. So, the bank wants a closing statement.

I used to send a Net Sheet for my sales in California, because many of the escrows do not use the standard HUD-1 closing statement. When Bank of America rejected an offer three times because the package did not include a closing statement that they could easily spot, I learned my lesson. Give them a HUD-1, that is what they are looking for.

This started my second educational step on the HUD-1. We bought software to create a HUD-1 and did them ourselves. When we missed a couple of the charges that should have been figured more accurately, the shortage came out of my commission.

The third education came from unexpected costs that came up at the last minute. The approval by the lender states that they will accept an exact amount of money, provided it is paid on or before a certain date, and provided that certain other conditions are met. When your payment from the closing does not meet that amount, you have two choices. The first is to try to get the bank to renegotiate and reduce the amount they will accpet. The second is to find the money somewhere else, which is usually the Realtor’s commission if the buyer will not put up the difference. When there is not enough time to get a reconsideration by the loss mitigation negotiator, the choice of taking it out of your commission is the only one that works.

So, figure the HUD-1 with some margin for error. Figure the costs high, to set the lender’s expectations low. Put in some items that may not be absolutely necessary. If you get to the closing and there is more money for the lender, there is no problem. If you get to the closing and unexpected costs come up, you may have them covered by the other items that you can adjust. Even if there is not enough “play in the joints” to absorb every unexpected cost, you will take less of a hit to your commission. If you get the lender to expect less and you end up paying the bank more, they will be happy.

First, create a HUD-1, not a net sheet. Second, have it created by the professionals who will comprehensively include every imaginable cost. Third, figure it so that the payoff aims on the low side for the bank, so that surprise costs will be covered and your short sale approval will still be valid.